TEST BANK – BUS. & TRANS. TX.

Estate tax

Prelims

1. Gross estate includes all his property, real or personal, tangible or intangible wherever
situated, except
A. Resident citizen
B. Non-resident citizen
C. Resident alien
D. Non- resident alien

2. Written notice shall be given to the CIR if the gross estate exceeds
A. P20, 000
B. P50, 000
C. P100, 000
D. P150, 000

3. From the time of death, notice of death should be given within

A. One month
B. 2 months
C. 3 months
D. 6 months

4. As a rule, estate tax return should be filed under oath if the gross estate exceeds
A. P100, 000
B. P200, 000
C. P500, 000
D. P1, 000, 000

5. If the estate consists of registrable property, such as real property, motor vehicle,
shares of stock or other similar property from which a clearance from the BIR is required
as a condition for the transfer of ownership, an estate tax return should be filed under
oath
A. If the gross estate exceeds P200, 000
B. If the gross estate exceeds P500, 000
C. If the gross estate exceeds P1, 000, 000
D. Regardless of the value of the gross estate

6. The estate tax return shall be supported with a statement duly certified by a CPA if the
gross estate exceeds
A. P1, 000, 000
B. P2, 000, 000
C. P5, 000, 000
D. P10, 000, 000

7. From the decedents’ death, the estate tax return shall be filed within
A. 2 months 3 0
B. 3 months
C. 6 months
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 D. 18 months

8. The CIR, in meritorious cases may grant a reasonable extension to file the return, not
exceeding
A. 30 days
B. 60 days
C. 3 months
D. 6 month

Items 9 through 12 pertain to the following information:

Proceeds of life insurance shall be included in the gross estate if the beneficiary designated is

9. The estate and the designation is

A. Revocable
B. Irrevocable
C. Whether revocable or irrevocable
D. Partly revocable, partly irrevocable

10. The executor and the designation is

A. Revocable
B. Irrevocable
C. Whether revocable or irrevocable
D. Partly revocable, partly irrevocable

11. The administrator and the designations is

A. Revocable
B. Irrevocable
C. Whether revocable or irrevocable
D. Partly revocable or irrevocable

12. A person other than the estate, executor or administrator and the designation is
A. Revocable
B. Irrevocable
C. Whether revocable or irrevocable
D. Partly evocable or irrevocable

Items 13 and 14 pertain to the following information:

If it will cause undue hardship on the part of the estate, the estate tax may be paid within

13. In case the estate is settled through the courts

A. 2 years
B. 3 years
C. 4 years
D. 5 years

14. In case the estate is settled without court’s intervention

A. 2 years
B. 3 years
C. 4 years 3 0
D. 5 years
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15. This is not part of the gross estate of the decedent
A. Conjugal property
B. Community property
C. Share of the surviving spouse
D. Exclusive property of the surviving spouse

16. This is not part of the conjugal property

A. Those acquired by onerous title during the marriage at the expense of the common
fund
B. Those acquired by industry or work of either of them
C. The fruits, rents or interests received or due during the marriage coming from the
conjugal property or from the exclusive properties of the spouses
D. Those acquired during the marriage by gratuitous title

17. Under the absolute community of property, jewelry for personal and exclusive, the wife
shall belong to the
A. Wife
B. Husband
C. Husband and wife
D. Children

18. A died leaving a farm land. In his will, he transferred the ownership thereof to B but
subject to the condition that C will have the right to use the land for a period of ten years
(usufruct).In the seventh year however, C died and in C’s will he surrendered his right
over the land to B.
A. The transfer is subject to donor’s tax.
B. The transfer is subject to estate tax.
C. The transfer is both an inclusion from the gross estate.
D. The above is tax exempt transfer.

19. One of the following is not an exemption or inclusion from gross estate
A. Capital or exclusive property of the surviving spouse
B. Properties outside the Philippines of a non-resident Chinese decedent
C. Shares of stock of San Miguel Corporation of a non- resident Mexican
D. The owner of usufruct in the owner of a naked title

20. Which of the following statements is not correct in succession?

A. Legitimate children share equally in their legitimate of ½ the net distributable estate.
B. When the spouse survives with one legitimate child, the legitimate of the spouse is ¼
of the net distributable estate.
C. When the spouse survives with two legitimate children, the legitimate of the spouse is
¼ of the net distributable net estate.
D. The legitimates of the legitimate and illegitimate children takes precedence over
the legitimate of the surviving spouse.

21. A made the following inter- vivos:

To B3 0C
To To D To E
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 Cost P100, 000 P100, 000 P100, 000 P100, 000

FMV, at the time of transfer 140, 000 140, 000 80, 000 80, 000

Consideration received 100, 000 100, 000 100, 000 0

FMV time death of A

one year after his death 120, 000 70, 000 120, 000 90, 000

The amount included to be included in the gross estate of A

A. P410, 000
B. P100, 000
C. P130, 000
D. P110, 000

22. The estate should be valued at the time

A. The heirs are ascertained
B. The estate tax is paid
C. The estate is ready for distribution to the heirs
D. Of death of the decedent

23. Medical expenses, to be deductible , must be incurred by the decedent within

A. One year prior to his death
B. One year after his death
C. Two years prior to his death
D. Three years prior to his death

24. The medical expense shall in no case exceed

A. P200, 000
B. P400, 000
C. P500, 000
D. P1, 000, 000

25. The amount of funeral expense that may be deducted from the gross estate is
A. 5% of the gross estate or P200, 000 whichever is lower
B. Actual funeral expense of P20, 000 whichever is lower
C. 5% of the gross estate or the actual funeral expenses whichever is lower
D. 5% of the gross estate or the actual funeral expenses of P200, 000 whichever is
the lowest

26. - Taxation of the estate shall be governed by the statue or law in force at the time of
distribution of the estate to the heirs.
- Succession takes place upon the determination of the respective share of the heirs in
the estate of the decedent
A. True, true
B. True, false
C. False, true
D. False, false
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27. - The family home includes the house and the lot where the house stands
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 - The value of the house and the lot where it stands, if a Family Home is deductible
from the estate of the decedent.
A. True, true
B. True, false
C. False, True
D. False, false

28. – Property brought to the marriage by either spouse shall belong to both spouses
- The share of the surviving spouse in the conjugal property is part of the gross estate
of the decedent
A. True, true
B. True, false
C. False, true
D. False, false

29. – Fruits and income of exclusive property shall belong the spouses
- Donations made by the decedent during lifetime but to take effect upon his death shall
be exempt from estate tax
A. True, true
B. True, False
C. False, true
D. False, false

30. - When exclusive property is sold during the marriage, the proceeds become property of
the spouses.
- The legal heirs of the decedent must be determined first before the correct estate tax
can be ascertained.
A. True, true
B. True, false
C. False, true
D. False, false

31. - Under the absolute community of property, property acquired before marriage by either
spouse including fruits and income, if any belong to both spouses
- The cost of burial plot, tombstone, monument or mausoleum, mourning apparel,
expenses of the wake and notices are deductible from gross estate as funeral expenses
A. True, true
B. True, false
C. False, true
D. False, false
32. – Expenses incurred for the performance of the rites and ceremonies incident to interment
and those incurred after internment, such as prayers, masses and entertainment are part of
the funeral expense.
- The administrator or executor shall submit a statement showing the disposition of the
proceeds of the loan if the claims against the estate was contracted within five years
before the death of the decedent.
A. True, true
B. True, false
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C. False, true
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 D. False, false
33. If the property is inherited before marriage it will belong to both spouses while if it is
inherited during marriage it is exclusive.
- Unless stipulated, the property relations shall be governed by conjugal partnership of
gains for marriages celebrated on or before August 3, 1988.
A. True, true
B. True, false
C. False, true
D. False, false

34. Unless stipulated, the property relations shall be governed by absolute community of
property for marriages celebrated on or before August 3, 1988.
- Under the regime of absolute community of property, property for personal and
exclusive use of either spouses except jewelry shall belong to both spouses.
A. True, true
B. True, false
C. False, true
D. False, false

35. The estate may claim a standard deduction of

A. P1, 000, 000
B. P2, 000, 000
C. P200, 000
D. P500, 000

36. Statement 1 – The court may authorize the distribution of estate, to an heir if in its sound
discretion it believes that the heir badly needs his share.
Statement 2 – The administrator or any of his heirs, may however upon authorization of
BIR withdraw from the decedent’s bank deposits P20, 000 without the required
certification that the estate tax has been paid.
A. True, true
B. True, false
C. False, true
D. False, false

37. Statement 1 – A died giving B power to appoint a person who will inherit A’s house and
lot. B, however can only choose among C, D, E and F. B decided to transfer the property
to C, in B’s will when he was old already. The transfer from B to C is subject to estate
tax.
Statement 2 – During A’s lifetime, he decided to give B as gift his car subject to the
condition that if B does not become a CPA within three years, A shall revoke the transfer.
In the second year, however, A died. The car can no longer from part of A’s gross estate.
A. True, true
B. True, false
C. False, true
D. False, false

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38. Statement 1 – Unpaid mortgage indebtedness is deductible from the gross estate provided
the said property subject to the indebtedness in included in the gross estate, net of
mortgage indebtedness.
Statement 2 – A donation inter-vivos by the decedent to the Philippine government few
months before the death is a deduction from the gross estate
A. True, true
B. True, false
C. False, true
D. False, false

39. A decedent left the following properties:

Land in Italy (with PIM unpaid mortgage) P2, 000, 000
Land in Laguna, Philippines 500, 000
Franchise in USA 100, 000
Receivable from debtor in Philippines 70, 000
Receivable from debtor in USA 100, 000
Bank deposits in USA 80, 000
Shares of stock of PLDT, Philippines 75, 000
Shares of stocks of ABC, foreign corporation 75% of the
business in the Philippines 125, 000
Other personal properties 300, 000
Zonal value of the land in Laguna 75, 000

If the decedent is a non resident citizen, his gross estate is

a. P3, 650, 000

b. P3, 600, 000
c. P2, 500, 000
d. P2, 650, 000

40. Using the above date, if the decedent is a non-resident alien, his gross estate is
A. P1, 195, 000
B. P945, 000
C. P1, 320, 000
D. P1, 070, 000

41. If in the preceding number reciprocity law can be applied, the gross estate is
A. P1, 050, 000
B. P1, 195, 000
C. P1, 250, 000
D. P1, 070, 000

42. Based on the above problem but assuming that the PLDT shares of stocks are not listed in
the local stock exchange, and there are 1, 000 shares at the time of death, the company’s
outstanding shares were 10, 000 shares. Its retained earnings was P2, 000, 000,
par value per share was P50. The gross estate should show the said shares at
A. Still at P75, 000
B. P250, 000
3 0
C. P200, 000
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 D. P0

43. Which of the following statements is not correct?

A. Taxes may be imposed to raise revenues or to provide disincentives to certain
activities within the state.
B. The state can have the power to taxation even if the Constitution does not expressly
give it the power to tax.
C. For the exercise of the power of taxation, the state can tax anything at any time.
D. The provisions of taxation in the Philippine Constitution are grants of power
and not limitations on taxing powers.

44. One of the characteristics of our internal revenue laws is that they are
A. Political in nature
B. Penal in nature
C. Generally prospective in operation although the tax statute may nevertheless operate
retrospectively provided it is clearly the legislative intent.
D. Answer not given.

45. In case of conflict between tax laws and generally accepted accounting principles
(GAAP):
A. Both tax and GAAP shall be enforced;
B. GAAP shall prevail over tax laws;
C. Tax laws shall prevail over GAAP;
D. The issue shall be resolved by the courts.

46. The following are similarities of the inherent power of taxation, eminent domain and
police power, except one:
A. Are necessary attributes of sovereignty;
B. Interfere with private rights and property;
C. Affect all persons or the public;
D. Are legislative in implementation.

47. Tax as distinguished from license fee:

A. Non-payment does not necessarily render the business illegal;
B. A regulatory measure;
C. Imposes in the exercise of police power;
D. Limited to cover cost of regulation.

48. Which statement refers to police power as distinguished from taxation?

A. It can be imposed on specific property or properties;
B. The amount imposes depends on whether the activity is useful or not;
C. It involves the taking of property by the government;
D. The amount imposed has no limit.

49. The distinction of a tax from permit or license is that a tax is:
A. Imposed for regulation;
B. One which involves an extension of police power;
C. One in which there is generally no limit on the amount that may be imposed;
D. Answer not given 3 0
50. Which of the following is not an example of excise tax:
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 A. Transfer tax
B. Sales tax
C. Real property tax
D. Income tax

51. Value-added tax is an example of:

A. Graduated tax;
B. Progressive tax;
C. Regressive tax;
D. Proportional tax

52. Which statement is wrong?

A. A tax is a demand of sovereignty;
B. A toll is demand of ownership;
C. A special assessment is a tax
D. Customs duty is a tax

53. Which of the following is not a deduction from the gross estate under the National
Internal Revenue Code?
A. Taxes
B. Losses
C. Legacy to the government
D. Legacy to a charitable institution

54. The following are the requisites in order that claims against the decedent’s estate may be
deductible, except:
A. They must be existing against the estate;
B. They must be reasonably certain as to amounts;
C. They must have been prescribed;
D. They must be enforced by the claimants.

55. Which of the following is deductible from the gross estate?

A. Income tax paid on income received after death;
B. Property taxes not accrued prior to death;
C. Estate tax paid to a foreign country;
D. Donor’s tax accrued prior to death.

Midterm

Semi-final

1. Gross estate includes all his property, real or personal, tangible or intangible wherever
situated, except
A. Resident citizen
B. Non-resident citizen 3 0
C. Resident alien
3 0
 D. No-resident alien

2. Written notice shall be given to the CIR if the gross estate exceeds
A. P20,000
B. P50,000
C. P100,000
D. P150,000

3. From the time of death, notice of death should be given within

A. One month
B. 2 months
C. 3 months
D. 6 months

4. As a rule, estate tax return should be filed under oath if the gross estate exceeds
A. P100,000
B. P200,000
C. P500,000
D. P1,000,000

5. If the estate consists of registrable property, such as real property, motor vehicle, shares
of stock or other similar property from which a clearance from the BIR is required as a
condition for the transfer of ownership, an estate tax return should be filed under oath
A. If the gross estate exceeds P200,000
B. If the gross estate exceeds P500,000
C. If the gross estate exceeds P1,000,000
D. Regardless of the value of the gross estate.

6. The estate tax return shall be supported with a statement duly certified by a CPA if the
gross estate exceeds
A. P1,000,000
B. P2,000,000
C. P5,000,000
D. P10,000,000

7. From the decedents’ death, the estate tax return shall be filed within
A. 2 months
B. 3 months
C. 6 months
D. 18 months

8. The CIR, in meritorious cases may grant a reasonable extension to file the return, not
exceeding
A. 30 days
B. 60 days
C. 3 months
D. 6 months

Items 9 through 12 pertain to the following information:

Proceeds of life insurance shall be included in the gross estate if the beneficiary
designated is

9. The estate and the designation is

A. Revocable
B. Irrevocable 3 0
C. Whether revocable or irrevocable
3 0
 C. P500,000
D. P1,000,000

25. The amount of funeral expense that may be deducted from the gross estate is
A. 5%of the gross estate or P200,000 whichever is lower
B. Actual funeral expense of P20,000 whichever is lower
C. 5% of the gross estate or the actual funeral expenses whichever is lower
D. 5% of the gross estate or the actual funeral expenses of P200,000 whichever is
lower

26. – Taxation of the estate shall be governed by the statue or law in force at the time of
distribution of the estate to the heirs.

- Succession takes place upon the determination of the respective share of the heirs in
the estate of the decedent.
A. True; True
B. True; False
C. False; True
D. False; False

27. – The family home includes the house and the lot where the house stands.

- The value of the house and the3lot where

0 it stands, if a family home is deductible from
the estate of the decedent
 A. True; True
B. True; False
C. False; True
D. False; False

28. – Property brought to the marriage by either spouse shall belong to both spouses.

- The share of the surviving spouse in the conjugal property is part of the gross estate
of the decedent.

A. True; True
B. True; False
C. False; True
D. False; False

29. – Fruits and income of exclusive property shall belong to the spouses.

- Donations made by the decedent during lifetime but to take effect upon his death shall
be exempt from estate tax.

A. True; True
B. True; False
C. False; True
D. False; False
30. – When exclusive property is sold during the marriage, the proceeds become the property
of the spouses.

- The legal heirs of the decedent must be determined first before the correct estate tax
can be ascertained.

A. True; True
B. True; False

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 C. False; True
D. False; False

31. – Under the absolute community of property, property acquired before marriage by
either spouse including fruits and income, if any belong to both spouses.

- The cost of burial plot, tombstone, monument or mausoleum, mourning apparel,

expenses at the wake and notices are deductible from gross estate as funeral expenses.

A. True; True
B. True; False
C. False; True
D. False; False

32. – Expenses incurred for the performance of the rites and ceremonies incident to interment
and those incurred after interment, such as prayers, masses and entertainment are part
of the funeral expenses.

- The administrator or executor shall submit a statement showing the disposition of the
proceeds of the loan if the claims against the estate was contracted within five years
before the death of the decedent.
A. True; True
B. True; False
C. False; True
D. False; False

33. – If the property is inherited before marriage it will belong to both spouses while if it is
inherited during marriage it is exclusive.

- Unless stipulated, the property relations shall be governed by conjugal partnership of

gains for marriages celebrated on or before August 3, 1988.
A. True; True
B. True; False
C. False; True
D. False; False

34. – Unless stipulated, the property relations shall be governed by absolute community of
property for marriages celebrated on or before August 3, 1988.
3 0
- Under the regime of absolute community of property, property for personal and
exclusive use of either spouses except jewelry shall belong to both spouses.
 A. True; True
B. True; False
C. False; True
D. False; False

35. The estate may claim a standard deduction of

A. P1,000,000
B. P2,000,000
C. P200,000
D. P500,000

36. – The court may authorize the distribution of estate, to an heir if in its sound discretion it
believes that the heir badly needs his share.

3 0

- The administrator or any of his heirs, may however upon authorization of BIR
 withdraw from the decedent’s bank deposits P20,000 without the required
certification that the estate tax has been paid.
A. True; True
B. True; False
C. False; True
D. False; False

37. - A died giving B power to appoint a person who will inherit A’s house and lot. B,
however can only choose among C, D, E and F. B decided to transfer the property to C,
in B’s will when he was old already. The transfer from B to C is subject to estate tax.

- During A’s lifetime, he decided to give B as gift his car subject to the condition that if
B does not become a CPA within three, A shall revoke the transfer. In the second year,
however, A died. The car can no longer form part of A’s gross estate.
A. True; True
B. True; False
C. False; True
D. False; False

38. – Unpaid mortgage indebtedness is deductible from the gross estate provided the said
property is subject to the indebtedness is included in the gross estate, net of mortgage
indebtedness.

- A donation inter-vivos by the decedent to the Philippine government few months

before the death is a deduction from the gross estate.
A. True; True
B. True; False
C. False; True
D. False; False

39. One of the statement is wrong. Which is it? Vanishing deduction is allowed if the
decedent is:
A. A resident citizen, and on property located in the Philippines.
B. A resident citizen, and on property located outside the Philippines.
C. A non- resident citizen, and on property in the Philippines.
D. A resident alien, and on property in the Philippines.

40. - For a vanishing deduction, there should always be two deaths within five years from
receipt of property.

- For two acquisitions by lucrative title at different dates, but both within five years
from present death, there may be one consolidated computation only for the vanishing
deduction
A. Both statements are true.
B. Both statements are false.
C. The first statement is true, but the second statement is false.
D. The first statement is false, but the second statement is true.

41. – If the decedent was married and under the system of absolute community of property,
the vanishing deduction may be a deduction from the community properties.

- If a claim arises out of a debt instrument, a claim for deduction must be in all cases
require that the debt instrument
3 be notarized.
0
A. Both statements are true.
 B. Both statements are false.
C. The first statement is true, but the second statement is false.
D. The first statement is false, but the second statement is true.

42. – No vanishing deduction shall be allowed where the property was, in prior estate,
previously subject to vanishing deduction.

- Property outside the Philippines when the previous decedent (citizen of the
Philippines) died, and in the Philippines at the time of the present decedent’s (non-
resident, not citizen) death, may have a vanishing deduction.
A. Both statement are true
B. Both statements are false.
C. The first statement is true, but the second statement is false.
D. The first statement is false, but the second statement is true.

3 was 0under the conjugal partnership of gains. Among

43. The decedent, during the lifetime,
his allowable deductions from the gross estate is vanishing deduction and the following:
 Funeral expenses P 80,000
Judicial expenses 100,000
Claims against conjugal properties 120,000
Mortgage on exclusive property 40,000
Bequest to charitable institution 5,000
Bequest to the Philippine Government 60,000
Medical expenses 300,000
Amount received under R.A. 4917 60,000

In the formula for vanishing deduction where:

Initial basis of property x Deductions
Gross estate

The multiplier “deductions” is:

A. P400,000
B. P405,000
C. P40,000
D. P100,000

44. Mr. Ramon Asuncion, citizen and resident of the Philippines, married, died, leaving the
following properties:

Real and personal properties acquired during the marriage P3,000,000

Land and building inherited from the father 1 ½ years ago
(with a fair market value at that time of P1,500,000), and
Used at the time of his death as home for his family 2,000,000
Car, purchased with cash received as gift from the mother
During the year 500,000
Cash (including P500,000 received by inheritance from the
Father) 1,500,000
Claims against conjugal properties 600,000
Unpaid mortgage on the land and building inherited
(from an original of P600,000 when inherited) 100,000
The vanishing deductions is:
A. P1,530,000
B. P1,080,000
C. P 450,000
D. P1,130,000

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45. Which is wrong? Deduction for transfers for public purposes:
A. Means legacy in a last will and testament to the government.
B. Means device in a last will and testament to the government.
C. Includes any kind to the government for public purposes.
D. Will not include legacies to charitable institutions.

46. Statement 1: Vanishing deduction for the estate of a non-resident, not citizen of the
Philippines, is allowed only if the property is located in the Philippines.

Statement 2: Deduction for transfers for public purposes for the estate of a non-resident,
not citizen of the Philippines, is allowed only if the property is located in the
Philippines.
A. Both statement are true
B. Both statements are false.
C. The first statement is true, but the second statement is false.
D. The first statement is false, but the second statement is true.

47. Statement 1: The standard deduction from the gross estate is always P1,000,000, whether
the decedent is married or not.

Statement 2: For a married person with exclusive and conjugal/community properties, the
standard deduction need not be classified as exclusive or conjugal deduction.
A. Both statement are true
B. Both statements are false.
C. The first statement is true, but the second statement is false.
D. The first statement is false, but the second statement is true.

48. One of the following statements is wrong. Identify. Medical expense deductible from the
gross estate:
A. Is only if the decedent was a citizen or resident of the Philippines at the time of death.
B. Is actual medical expenses or P500,000, whichever is lower.
C. Need not be on the illness resulting in death.
D. Must be unpaid at the time3of death.0